Demand for gold fell to its lowest in six years in the second quarter of 2015, amid declines in India and China, which accounted for half of the fall to 914.9 tonnes, according to the World Gold Council on Thursday.
“Gold prices were largely directionless between March and June. This was both the cause and effect of weak demand,” it said in a report.
In volume terms, the jewellery sector faced the biggest decline in demand – it fell 81.1 tonnes year-on-year, mainly due to the weakness in the Indian and Chinese markets.
Indian jewellery demand fell 23 percent year-on-year in the second quarter, due to the unseasonal rainfall that damaged crops in the first quarter and the consequent impact on incomes among the rural population, according to the WGC.
Additionally, a relative dearth of auspicious days for marriages in June and July hit wedding-related demand in the second quarter.
In China, jewellery demand dropped five percent. “The consumer environment in China has been overshadowed by the deceleration in domestic GDP growth and the jewellery market has been a notable casualty of this trend,” it said in the report.
“Stock market turbulence also impeded demand,” it added.
Meanwhile, central bank purchases of gold fell 13 percent in the second quarter from a year earlier to 137.4 tonnes.
Russia was the biggest purchaser of gold – it purchased 36.8 tonnes during the quarter. This brought its gold reserves to a total of 1,275 tonnes, and maintained a 13 percent share of total reserves.
European investors, however, increased their gold exposure, due to uncertainty over Greece and the euro. Bar and coin demand for the region expanded by 7.3 tonnes, compared with average declines of 1.7 tonnes across all other markets.
Investment in European ETFs increased by 6.6 tonnes during the second quarter – this outperformed the ETF universe as a whole, which saw modest outflows of just under 23 tonnes in the second quarter.
The positive impact on gold investment was confined to European markets, however, as they were the most likely to be directly affected by any contagion, the report said.
On the supply side, total supply contracted by five percent year-on-year, to 1,032.6 tonnes in the second quarter despite another quarter of modest growth in mine production.
Mine output increased by three percent to 786.6 tonnes. Growth was scattered across the globe as mines in a number of countries were able to generate minor increases in output.
(Editing by Martin Hayes)
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